Time Warner Shopping Time Inc. Likely Price Tag? Try $2.5 Billion

Jeff Bercovici
,
Forbes Staff
I cover technology with an emphasis on social and digital media.

The Time Warner Center. (Photo credit: Wikipedia)

Time Inc., America's biggest magazine publisher, is for sale -- sort of. Fortune reports that parent Time Warner is in talks with a "serious buyer" to sell most of its periodicals -- and who better to know than Fortune, being one of those periodicals?

The "sort of" is that the media conglomerate plans to hang onto three of its most best-known titles: Time, its flagship and namesake, Sports Illustrated and Fortune. Notably missing from that list is People, which is not only the company's most profitable title but by most accounts the most profitable magazine in the world, with $997 million in advertising sales last year and hundreds of millions more in newsstand and subscription revenues.

People and its spinoff titles, People en Espanol and People Style Watch, account for nearly a quarter of Time Inc.'s revenues. Meanwhile, Time, Sports Illustrated and Fortune combined represent about 28% of the total. (That's based on data from the Publishers Information Bureau, which tallies ad pages and revenue for the industry. It doesn't reflect circulation revenues, but it's fair to assume those are roughly proportionate.)

If Time Warner were to sell all of Time Inc., it would most likely fetch somewhere in the neighborhood of $3 billion to $6 billion. Time Warner has a current enterprise value of $46.9 billion, and Time Inc. generated just under 12% of its $28.7 billion in revenues last year, but given its relatively low operating margin and growth rate, most buyers would likely value it at somewhere less than the $5.3 billion that calculation suggests.

A more conservative valuation places its worth at something like 1x revenues, or $3.44 billion, to use the 2012 total. Subtract 28% for Time, Fortune and SI and that leaves you with a price tag of $2.5 billion, before any premium comes into play.

Who'd be willing and able to pay $2.5 billion for a collection of mostly female-targeted lifestyle magazines? Domestically, the prime candidates would seem to be Meredith Corp. and Hearst, either of which could smoothly absorb most of them into its existing portfolios. Conde Nast is also an outside possibility, but it's been using its acquisitions fund for digital businesses. Update: Warren Buffett is also a possibility, according to Ad Age, which notes that he once told former Time Warner CEO Richard Parsons he'd be interested if Time Inc. became available.

One title it's hard to see fitting into anyone's stable is Entertainment Weekly. It's been rumored to be a candidate for closure for years. Weeklies are a troubled enough corner of the magazine business as it is; outside the sheltering environment of a publisher with an infrastructure for them, it's hard to see EW lasting long.